Minimum Wage, New Labor Laws, Pay

2017 LABOR LAW CHANGES

The legislature passed many new employment laws or tinkered with old ones.  Below are a three of the most significant changes.

MINIMUM WAGE INCREASE

 In California, the minimum wage will increase to $10.50 per hour on January 1, 2017 for employers who have more than 25 employees.  The people of San Diego passed a ballot proposition in June that increased the minimum wage to $10.50 per hour and will further increase it to $11.50 per hour on January 1, 2017.  Workers get the highest minimum wage rate among federal, state, or local minimum wage laws.

The Federal Minimum Wage will not change for now, but one aspect of it might.  On December 1, 2016, the minimum salary for exempt employees was scheduled to increase to $47,476.00 per year.  That is more than double the old federal minimum salary requirement and is higher than most state minimum salary requirements.  However, a judge in Texas recently ruled that the law would NOT go into effect on December 1.  It might go into effect later; however, the judge may permanently bar the change.  Either way, the judge’s ruling will probably get appealed.

The minimum salary in California will increase to $43,680.00 for exempt employees on January 1, but only for employees who work for employers who employ more than 25 employees.  Why does the state minimum salary distinguish between employers who employ more or less than 25 employees?

The answer is the way in which the minimum wage works in California.  The minimum salary in California is twice the state minimum wage times the number of hours a full- time worker, at 40 hours per week, works in a year.  In other words, the number of hours the state presumes a full-time worker to work in a year is 2080 hours.  Two Thousand Eighty hours times $21 per hour (twice the $10.50 state minimum wage for employers who employ 26 or more employees) equals $43,680.00.  As of January 1, that will be the minimum salary for exempt employees who work for an employer who employs at least 26 employees.  The state minimum wage for all other employees (those who work for an employer who employs fewer than 26 workers) is $10 per hour.  Thus, for employers who employ 25 or fewer employees, the minimum annual salary for exempt workers is $41,600.00 (2 x $10/hour x 2080 hours) or $800.00 per week.

The California minimum wage rate will increase every year through 2023.  The scheduled increases are below:

For employers who employ at least 26 employees:

  1. On January 1, 2017, the minimum wage will increase to $10.50 per hour.
  2. On January 1, 2018, the minimum wage will increase to $11 per hour.
  3. On January 1, 2019, the minimum wage will increase to $12 per hour.
  4. On January 1, 2020, the minimum wage will increase to $13 per hour.
  5. On January 1, 2021, the minimum wage will increase to $14 per hour.
  6. On January 1, 2022, the minimum wage will increase to $15 per hour.

For employers who employ 25 or fewer employees:

  1. On January 1, 2018, the minimum wage will increase to $10.50 per hour.
  2. On January 1, 2019, the minimum wage will increase to $11 per hour.
  3. On January 1, 2020, the minimum wage will increase to $12 per hour.
  4. On January 1, 2021, the minimum wage will increase to $13 per hour.
  5. On January 1, 2022, the minimum wage will increase to $14 per hour.
  6. On January 1, 2023, the minimum wage will increase to $15 per hour.

The minimum yearly salary for exempt employees will increase by twice the minimum wage times 2080 hours.  The governor has the ability to delay implementation of the above minimum wage schedules.

FAIR PAY ACT

In 2015, California amended Labor Code §1197.5 to prevent employers from retaliating against employees who make Fair Pay Act claims.  That law also made it easier for employees to prove unequal gender pay.  On January 1, 2017, the law will now allow employees to make Fair Pay Act claims based on differences in pay between employees of different races and ethnicities as well as gender.  In addition, past salary levels cannot justify lower pay.

CHOICE OF LAW AND FORUM SELECTION CLAUSES

California Labor Code §925 was passed this year and will go into effect on January 1, 2017.  It prevents employment contracts from forcing California workers to bring their claims outside of California when they live and work in California.  It also prevents employers from forcing employees to be governed by the law of another state.  Out of state employers who hire California workers to perform work in California will not be allowed to use handbook provisions or employment contract provisions to force California workers to bring claims out of state and under another state’s laws.  Often, the employment laws of another state favor the employer.  Of course, trying to litigate in a different state significantly burdens most California workers.  In contrast, Labor Code §925 will allow California employees to file claims in California under California law.

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Class Action, Minimum Wage

Managers Are Not Exempt Unless They Make $41,600!

Most employers know that California requires them to pay every employee at least $10 per hour.  Did you realize that an increase in minimum wage requires an increase in salary for exempt managers?  If not, listen up.

Exempt white collar employees must meet certain criteria to be considered exempt.  Probably the most important is the minimum salary level.  Exempt employees must make two times the minimum wage in a theoretical 40-hour work week.  Forty hours per week equals 2080 hours per year (52 weeks x 40 hours).  That means the minimum salary an exempt employee must make is $41,600 (2 x $10 x 2080 hours).  Thus, California requires all managers to make at least $41,600 to be an exempt employee.  Of course, that is also the minimum salary for all other white collar exemptions, unless a particular exemption has a different minimum wage requirement.  For instance, an exempt computer professional must be paid at least $41.85 per hour or at least an $87,185.14 salary per year.  Each year the computer professional wage rates increase according to the yearly percentage increase in the California Consumer Price Index.

I believe that the minimum salary level is the most important criteria to meet for exempt employees because it is the easiest criteria to challenge in a misclassification case.  If a manager is not paid the minimum salary, then that manager simply is not exempt.  If that manager later brings a lawsuit for unpaid overtime, then the employer will lose and will owe back wages, assuming the manager actually worked overtime hours.  Most of the other exemption criteria are not as clearly discernable.

Misclassification cases often create class action liability if enough managers or other exempt employees do not receive the minimum salary.  In both individual claims and class action claims, the prevailing employees are entitled to attorney’s fees.

Employers, I highly recommend that all the managers that you want to classify as exempt make at least $41,600 per year.  Employees, if you are exempt, make sure that you are making the minimum salary.  Local wage laws that have higher minimum wage requirements also increase minimum salaries for exempt employees.  Los Angeles, for instance, will have a minimum wage rate of $10.50 per hour starting on July 1, 2016.  The corresponding minimum salary will be $43,680 (2 x $10.50 x 2080 hours).

I am available to consult with anyone who has a question about the required minimum salary or other exempt employee requirements.  Call me at (858) 292-0792.

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Discrimination, Harassment, Holiday Parties, Minimum Wage

Holiday Parties and the Law

The holiday party season is upon us, so, do employers and employees have any special concerns with holiday office parties?  Of course they do.  Luckily, employers can take steps to limit their liability exposure, and employees can keep an eye out to protect themselves.

Around holiday time, alcohol often influences how people behave.  As a rule, employees should watch how much they drink, and employers should contain the influence of alcohol during their company sponsored parties.  Common types of cases related to office holiday parties include: third party claims against intoxicated employees, sexual harassment claims, worker compensation claims, and wage claims.  As you can probably guess, the first three categories often have alcohol consumption involved with them.

For example, in Harris v. Trojan Fireworks Co., (1981) 120 Cal.App.3d 157, an intoxicated employee caused a terrible car accident while driving home from his employer’s party.  The people in the other car were terribly injured.  In fact, one person died in the accident.  The appellate court said that California laws generally bar liability for social hosts when a guest gets into a car accident after a party.  However, the court found that the work party situation was different, at least in this case, because, among other things, the party was held at the work place and during work hours, the employer paid the employee to attend, and that employee was encouraged to drink excessively.

Watch out for naughty Santa Clauses at holiday parties.  In one California case, Brennan v. Townsend & O’Leary Enterprises, Inc., (2011) 199 Cal.App.4th 1336, the plaintiff sued partly because of activities at two different parties.  At the first one, the Santa had female employees sit on his lap.  He then proceeded to ask them about their love lives.  At the second party, a different Santa wore a cap with vulgar words.  Ultimately, the employer was able to escape liability, but only after convincing an appellate court to overturn $250,000 jury award.  Employers, make your Santa’s behave!

When an employer requires attendance at a party, the employers may be exposing itself to wage claims.  Often the Courts find that required attendance is a function of employer control.  When an employer exerts control, usually the employee must be paid for the time under which he or she was being controlled.  My advice: Do not require attendance at a holiday party.

The following is a list of things that an employer can do to help contain liability for holiday parties:

  1. Attendance should be voluntary.
  2. Limit the amount of shop talk at the party.
  3. Don’t ask employees to perform special functions at the party.
  4. Invite the families of the employees.
  5. Hold the party away from the work site.
  6. Make sure that sexual harassment training is up-to-date.
  7. Make clear that sexual harassment at the party will not be tolerated.
  8. Harassment policies should cover off location events.
  9. Hold the event after hours or on a weekend.
  10. Don’t take attendance.
  11. Provide plenty of non-alcoholic beverages.
  12. Investigate complaints about party events as seriously as you would investigate other work place complaints.
  13. Choose to not serve alcohol
  14. If the employer chooses to serve alcohol, limit the amount employees can drink.
  15. Have a professional alcohol caterer screen for intoxication.
  16. Only give out a limited number of drink tickets.
  17. Have employees pay for the drinks they consume.
  18. Arrange for alternative transportation.
  19. Provide discounted rates at the hotel where the party is located.
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Sick Leave

PAID SICK LEAVE IN CALIFORNIA

California’s new sick leave law went into effect on July 1 of this year.  It applies to all employers, no matter how many employees an employer has.  There are very few exceptions, so all California employers need to know the law.  The limited exceptions to the new sick leave law are: (1) Certain union employees, (2) State in home care workers, (3) Some air carrier employees.

Employers must give sick leave to employees who have worked at least 30 days within the employment year.  The sick leave accrues at the rate of 1 hour for every 30 hours worked.  Employers may provide only 24 hours (3 days) of sick leave per year if the employer offers its employees three sick days at the beginning of the employment year.  Barring that, an employer must allow its employees to accumulate up to 6 days of sick leave per year.  Nevertheless, an employer may still limit sick leave to just 3 days per year.  In that case, unused leave must be carried over to the next year.  After 90 days of employment, employees may begin to use accrued sick.

Employers must track sick leave accumulation either on employee wage statements or on separate sick leave statements.  An employer can avoid the tracking headache by creating a policy in which employees receive at least 24 hours of sick leave at the beginning of each year.  In that case, the only thing to track is the amount that the employee uses during the year.  Employers must maintain records that track the accumulation and use of sick leave for a period of 3 years.

If tracked separately from vacation or PTO, California will not consider sick leave as a wage.  In that case, an employer will not need to pay remaining balances to a terminated employee at the time of termination.  However, if an employer includes sick leave with either vacation or PTO, then the sick leave will become a wage and will need to be paid out as wages at the time of termination.

Sick leave may be used for an employee’s health condition or for the health condition of a family member of an employee.  The code defines “family” very broadly: Child, Parent, Spouse or registered domestic partner, Grandparent, Grandchild, and Sibling.  An employee can also use sick leave for preventive care, domestic violence, sexual assault, and stalking.

No employer may retaliate against an employee for requesting sick time off or for attempting to enforce sick leave rights.  The employer may require employees to us a minimum amount of sick leave, but that minimum amount may not be greater than 2 hours.  Nevertheless, employees have the right to determine how much sick leave to use as long as they use at least the minimum amount.  An employer must display a poster describing the requirements of the law.

The associated fines are very stiff.  An employee can collect up to $250 for each withheld sick day, up to a maximum of $4,000.  If the employee suffers other related harm, such as a wrongful termination, then the employer can suffer civil penalties of $50 for each day the violation remains uncorrected, up to $4,000.  In addition, if an employer does not promptly comply with the law after receiving notice of its violations, then the state can collect a daily penalty of $50 with no limit.  The Private Attorney General Act will allow collective penalties to accumulate.  The prosecuting party can get fines, special damages for the employee(s), costs of suit, and attorneys’ fees.

Employers must be aware of this law.  Ignoring it, or the rights conferred, can come at a hefty price.

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Tips

Employer Required Tip Pools: Are they Legal? How are they taxed?

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Are tip pools legal when required by an employer?  The quick answer to that question is yes.  But under both California law and federal law, the pool must meet certain legal requirements.

As a general rule tips are optional, freely given payments for service above and beyond the cost of the products being sold.  The customer has the complete right to set the amount of the tip and may choose not to tip at all.  The employer should have no say in the amount of the gratuity.

California Labor Code §§350-56 lays the legal foundation for tip pool requirements in California.  The law forbids the employer from taking or sharing in tips (Labor Code §351), and employers must track all tips that they collect for employees (Labor Code §353).  Employer mandated tip pooling is legal, but the house cannot share in the pooling arrangement.  The tip pool must be fair and reasonable.  Only those who are in the chain of service can be in the pool.  For instance, an employer cannot require servers to include cooks and dishwashers in the pool.

Tips are taxable income.  When tips are shared, who must pay the tax?

Technically, all persons who receive tips or a share of the tips must report it as income.  However, a common practice is for the employer to allocate the entire tip to the server who waits on the table.  In that case, even when the server shares the tip, the server is the only person who pays tax on the entire tip.  The employers records do not show any other employees in the service chain as persons who receive tips, even though they actually do in tip pooling arrangements.  Presumably, those employees who share the server’s tip as part of the chain of service escape tax liability because the employer’s records do not show them collecting any tips.  In that case, the server unfairly pays tax on the portion of the tip that he or she did not actually take home.

 

S. Ward Heinrichs, Esq.
BACKSTROM & HEINRICHS
Attorneys at Law
A Professional Corporation
4565 Ruffner Street, Suite 207
San Diego, CA 92111
(858) 292-0792
(858) 408-7543 (fax)

http://bestemploymentattorneysandiego.com/

http://twitter.com/#!/WardHeinrichs

www.facebook.com/BackstromandHeinrichs

http://www.linkedin.com/pub/ward-heinrichs/45/806/83b

 

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Telecommuting, Working from Home

Working from Home Podcast

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On February 26, 2014, I gave a radio interview about the legal and practical issues of working from home.  Please click this link to listen: http://www.bigblendradio.com/February-26-2014.html.  The related article was posted on this blog.  Feel free to add comments about the article or the radio show.

S. Ward Heinrichs, Esq.
BACKSTROM & HEINRICHS
Attorneys at Law
A Professional Corporation
4565 Ruffner Street, Suite 207
San Diego, CA 92111
(858) 292-0792
(858) 408-7543 (fax)

http://bestemploymentattorneysandiego.com/

http://twitter.com/#!/WardHeinrichs

www.facebook.com/BackstromandHeinrichs

http://www.linkedin.com/pub/ward-heinrichs/45/806/83b

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Telecommuting, Work-at-home

Working from Home

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As a society, Americans are finding more opportunities to work from home.  In fact, the work-at-home trend has been growing steadily over the past two decades.  While this trend creates opportunities, it also creates problems for both employees and employers.

Have you seen emails claiming to offer work opportunities that provide thousands of dollars of monthly income in your spare time while working from home?  Many of those emails are scams.  Employees should watch out for offers that make unrealistic claims.  Those offers may simply be trying to get personal information to use in identity theft.  More likely, the email is simply a disguised sales pitch.  Regardless, neither are offers most job hunters welcome.

Some websites try to sift through the at-home work offers to present only the most reliable ones.  One of those websites is: http://www.flexjobs.com/.  Flexjobs makes a top one hundred list of companies who offer the best quality telecommuting jobs.  According to the list, some of the top telecommuting industries are: healthcare, sales, marketing, information technology, and education.

Working from home can test how we apply our employment law regulations.  For instance, can at-home workers be classified as independent contractors, or are they employees?  Generally, employers want to pay workers as independent contractors because employers need not pay for workers’ compensation insurance, withhold taxes, pay overtime, and adhere to break regulations, etc. for independent contractors.  The tests that determine whether a worker is an independent contractor or an employee are fairly complicated and fact intensive.  Please review our blog post to get a better idea of how those tests work: https://backstromandheinrichsblog.wordpress.com/2013/11/13/independent-contractor-or-employee/.

Essentially, an independent contractor controls the manner and method of completing a job.  On the other hand, an employer controls how, when, where, etc. an employee does the work.  For example, an attorney who has his or her own clients works as an independent contractor.  In that case, an attorney can elect to work from home and the client will have no say about that.  In addition, the client does not need to worry about whether the attorney is working overtime hours or is taking meal and rest periods.  In contrast, an hourly worker who works from home sorting through and organizing emails for several managers of a business is probably a non-exempt employee.  In that case, the employer will need to abide by applicable labor laws, such as: break times, minimum wage, overtime premium pay, wage withholding, etc.

Employers, who have work-at-home employees, lose some control over work product because no manager is on site to make sure that the work is getting done.  In those cases, a wise employer will have systems in place to monitor work efficiency.  In our example above, the employer might require the employee to read and organize 30 emails an hour.  Depending on the situation, many other methods of employee monitoring can apply.

Monitoring work schedules and work hours may also be a very important issue.  If an hourly employee works more than 8 hours in a day, the employer must pay overtime in California.  That same California employee will be entitled to at least two rest periods and a meal period during that shift.  If the employee works through those break times, the employer will be liable for additional penalties and wages.  One way of helping to ensure compliance with overtime, rest period, and meal period regulations is to have an online time clock.  Again, without a manager present, ensuring that an employee is actually working the hours that are tallied in the online program may be a challenge.

Working from home is not the norm, but it is becoming increasingly popular.  Commonly, we see good at-home work opportunities, but workers seeking those jobs must be careful of scams.  Likewise, employers need to carefully navigate the world of employment regulations after adding at home workers to its roles.  Employers need to decide whether those workers are independent contractors or employees.  If they are employees, then the employer must put into place systems and policies that will check work efficiency and monitor adherence to employment regulations.

S. Ward Heinrichs, Esq.
BACKSTROM & HEINRICHS
Attorneys at Law
A Professional Corporation
4565 Ruffner Street, Suite 206
San Diego, CA 92111
(858) 292-0792
(858) 874-8850 (fax)

http://www.backstromandheinrichs.com

http://twitter.com/#!/WardHeinrichs

www.facebook.com/BackstromandHeinrichs

http://www.linkedin.com/pub/ward-heinrichs/45/806/83b

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